APRA is probing prominent fintechs’ marketing of ‘banking’ services

afr.com:

The prudential regulator is considering whether US fintech giant Stripe and London-based 10x Banking are illegally marketing “banking-as-a-service” offerings.

The Federal Court on Monday ordered Andrew Garrett, a former winemaker, to stop using the word “bank” to describe his private businesses.

Mr Garrett had used the terms Dynamic Capital Bank, Banque de Capital Dynamique, and Banca di Como, despite not being authorised by the Australian Prudential Regulation Authority to operate as a bank. The Banking Act of 1959 prohibits a non-bank from using the words “bank”, “banker” or “banking” if APRA does not consent.

Liberal Senator Andrew Bragg says Stripe and 10x Banking may be in breach of the banking act. Alex Ellinghausen

Federal Court judge Michael Lee granted an injunction restraining Mr Garrett from assuming or using the word bank, or similar words, relating to any purported bank. APRA said he had “ignored requests” from it to stop referring to his businesses as “banks”.

It can now be revealed that APRA is examining other companies for potential inappropriate use of the word “banking” in their marketing of services, after Liberal Senator Andrew Bragg wrote to APRA chairman John Lonsdale last month flagging his concerns and naming four potential offenders.

In the letter, Senator Bragg alleged Stripe, one of the most highly valued private fintechs which provides payments services to businesses globally, and 10x Banking, which hosts cloud-based banking ledgers and includes Westpac as a client, “may be in breach of the act”.

Both companies’ websites refer to their “banking-as-a-service” products. This is a description of a concept also known as “embedded finance”, where bank-like services are provided through software, to